Yields Retreat • Dividend Boosts • REIT Earnings

Summary

• U.S. equity markets were mixed Friday but ended a choppy week with broad-based declines as the "reopening rotation" pushed Treasury yields to mid-pandemic highs and pressured valuations of COVID-winners.
• Ending the week with declines of nearly 2%, the S&P 500 finished lower by 0.5% today while the Dow Jones Industrial Average finished lower by 475 points.
• Real estate equities were under pressure today but outperformed on the week as the broad-based Equity REIT ETFs finished lower by 1.5% with 4-of-19 property sectors in positive territory.
• After briefly jumping above 1.60% yesterday, bonds caught a bid today as the 10-Year Treasury Yield retreated back below 1.50% after the BEA reported PCE inflation data that was roughly in-line with expectations.
• Beat and Boost continues to be the theme of REIT earnings season. A dozen REITs raised their dividend this week including three more of the last 24 hours - PLD, AMT, DLR - bringing the total this year to 33.

Real Estate Daily Recap

Our Real Estate Daily Recap discusses the notable news and events in the real estate sector over the last trading day and highlights sector-by-sector performance. We publish this note every afternoon on The REIT Forum and occasionally on our website and this Seeking Alpha blog to cover significant news and events. Subscribe to our free email list to keep up with the latest developments in the commercial and residential real estate sectors. Follow our real-time commentary on Twitter and LinkedIn.

U.S. equity markets were mixed Friday but ended a choppy week with broad-based declines as the "reopening rotation" pushed Treasury yields to mid-pandemic highs and pressured valuations of COVID-winners. Ending the week with declines of nearly 2%, the S&P 500 ETF (SPY) finished lower by 0.5% today while the Dow Jones Industrial Average (DIA) finished lower by 475 points. Real estate equities were under pressure today but outperformed on the week as the broad-based Equity REIT ETFs (VNQ) finished lower by 1.5% with 4-of-19 property sectors in positive territory while the Mortgage REIT ETFs (REM) gained 1.2%.

After briefly jumping above 1.60% yesterday, bonds caught a bid today as the 10-Year Treasury Yield (IEF) retreated back below 1.50% after the BEA reported PCE inflation data that was roughly in-line with expectations. Three of the eleven GICS equity sectors finished higher today as the Technology (XLK) and Communications (XLC) sectors bounced back on an otherwise rough week while homebuilders and the broader Hoya Capital Housing Index also outperformed today. We'll publish a full analysis and commentary of this week's developments in the real estate industry including more than 50 REIT earnings reports, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

Real Estate Earnings Update

Beat and Boost: We're now on the home stretch of another newsworthy REIT earnings season. REITs have generally reported better-than-expected results across the major property sectors and we've seen a wave of dividend boosts in the first two months of this year including three more yesterday afternoon from Lamar Advertising (LAMR), Digital Realty (DLR), and Prologis (PLD) bringing the total this year to 33.  

Net Lease: Store Capital (STOR) finished lower by about 1% after reporting results yesterday afternoon. STOR collected 90% of rents in Q4 - below most of their net lease peers - as the firm's movie theater tenants remain the lone segment with missed rents. STOR ended 2020 with a decline in full-year AFFO/share of -8.0% but sees a bounce-back to growth of 5.5% in 2021 which above the 3.4% growth expected by Spirit (SRC) and the 4.5% increase by Vereit (VER), but below the nearly 12% growth expected by National Retail (NNN) and the 8.3% growth expected by Realty Income (O). 

Self-Storage: CubeSmart (CUBE) finished lower by nearly 4% after reporting results that didn't quite match the high bar set earlier in the week by fellow storage REITs ExtraSpace (EXR), Public Storage (PSA), and Life Storage (LSI). CUBE reported full-year Core FFO growth of 1.8% in 2020 and sees growth of 4.7% in 2021 driven by a 4.3% rise in same-store NOI growth. CUBE's occupancy rates were 130 basis points higher from last year, but this the lowest occupancy increase of the five self-storage REITs. As a whole, self-storage REITs were quite impressive as the red-hot U.S. housing market has provided a critically needed tailwind following several years of disappointing growth.

Single-Family Rental: American Homes (AMH) finished lower by about 2% today despite reporting strong results yesterday afternoon as single-family rental REITs continue to see a reacceleration in rent growth. AMH reported full-year same-store NOI growth of 2.0% in 2020 and sees 3.5% growth in 2021, consistent with results from Invitation Homes (INVH) last week. AMH reported that rental rates on new leases - an important leading indicator of revenue growth - surged nearly 8% in Q4, driving a 5.5% increase in blended rent growth. AMH reported that its AFFO/share rose 4.5% in 2020 and sees nearly 8% AFFO growth in 2021. 

Billboards:Lamar Advertising (LAMR) finished lower by about 0.5% despite boosting its dividend and reporting yesterday afternoon that its AFFO/share declined by a rather modest 12.1% in full-year 2020 and providing guidance that indicates that its AFFO per share will bounce-back with roughly 4% growth this year.  Outfront Media (OUT) - which has a more transit-exposed portfolio - finished lower by about 1% after reporting yesterday afternoon that its full-year AFFO per share dipped more than 70% in 2020, but noted that it expects to return to positive revenue growth in the second quarter.

Mortgage REITs

Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 3.5% today but remain higher by 1.0% on the week. Commercial mREITs dipped 3.6% but are still higher by 0.8% on the week. Orchid Island (ORC) jumped nearly 2% after reporting that its Book Value Per Share (BVPS) increased slightly to $5.46 in Q4 for a total 4.0% economic gain including the dividend. Ladder Capital (LADR) gained more than 3% reporting that its BVPS was gained roughy 3% in Q4 to put it back within 5% of its pre-pandemic levels. Broadmark Realty (BRMK) finished lower by about 1.5% after reporting results that were roughly in-line with expectations. 

Anworth Mortgage (ANH) gained about 1% despite becoming the first mREIT since last June to lower its dividend when it decreased its payout to $0.04 from its prior (reduced) rate of $0.05. While more than dozen mREITs have raised their dividends over the last several months, just four of the 41 mortgage REITs are paying dividends above their pre-pandemic rates: Arbor Realty (ABR), Hannon Armstrong (HASI), NexPoint Real Estate (NREF), and Lument Finance (LFT).

REIT Preferreds & Bonds

Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.43% today, on average, and outperformed their respective common stock issues by an average of 0.93%. So far in 2021, REIT Preferred stocks are higher by 2.65% on a price-return basis. Excluding the handful of retail and hotel REITs with suspended (cumulative) preferred dividends, the average REIT preferred trades at a 3% discount to Par Value and has an average current yield of 6.54%.

Economic Data This week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

Announcement: Hoya Capital Joins The REIT Forum

Hoya Capital is excited to announce that we’ve teamed up with The REIT Forum to bring the premier research service on Seeking Alpha to the next level. Exclusive articles contain 2-3x more research content including access to The REIT Forum's exclusive ratings and live trackers and valuation tools. Sign up for the 2-week free trial today! The REIT Forum offers unmatched coverage and top-quality model portfolios for Equity and Mortgage REITs, Real Estate ETFs and CEFs, High-Yield BDCs, and REIT Preferred Stocks & Bonds.

Join our Mailing List on our Website

The REIT Forum is the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links to all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.

Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

I am/we are long all holdings listed at www.HoyaCapital.com